Reference no: EM132962556
Question - In 2016, North Company experienced a decline in the value of raw materials inventory resulting in a writedown from cost of P 3,600,000 to net realizable value of P 3,000,000. The entity uses the allowance method to record the necessary adjustment.
In 2017, market conditions have improved dramatically. On December 31, 2017, the inventory had a cost of P 5,000,000 and net realizable value of P 4,600,000?
What is included in the adjusting entry on December 31, 2017?
a. Debit gain on reversal of inventory writedown P 200,000.
b. Credit gain on reversal of inventory writedwon P 400,000.
c. Debit allowance for inventory writedown P 200,000.
d. Credit allowance for inventory writedown P 400,000.
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